Book-Keeping and Accountancy · Ch 4 — Reconstitution of Partnership (Retirement of Partner)
Sacrificing Ratio and Gaining Ratio — the Distinction
Sacrificing Ratio and Gaining Ratio — the Distinction
Students sometimes confuse the Sacrificing Ratio, met in the previous chapter on Admission of a Partner, with the Gaining Ratio of this chapter — the two describe opposite movements in a partner's share, and a Maharashtra HSC (MSBSHSE) exam question routinely asks students to distinguish them clearly.
Sacrificing Ratio
The ratio in which the existing partners give up (sacrifice) a share of their future profits in favour of a newly admitted partner; calculated as Old Share − New Share.
Gaining Ratio
The ratio in which the continuing partners acquire an additional share of future profits on the retirement or death of a partner; calculated as New Share − Old Share.
| Basis | Sacrificing Ratio | Gaining Ratio |
|---|---|---|
| Arises on | Admission of a new partner | Retirement or death of a partner |
| Direction of change | An existing partner's share DECREASES | A continuing partner's share INCREASES |
| Formula | Old Share − New Share | New Share − Old Share |
| Goodwill flow because of it | Sacrificing partners RECEIVE goodwill from the new partner | Gaining partners PAY goodwill to the retiring partner |
| Can be zero/uneven for one party | Rare — admitting a new partner almost always reduces every old partner's share to some extent | Common — if one continuing partner's own new share equals his old share, his gain is nil and the other continuing partner(s) absorb the whole of the retiring partner's share |
The ratio in which existing partners give up a share of future profits in favour of a newly admitted partner; Ol …